I've used it in various capacities for putting together apps to stream recorded webcasts using CamStudio and splicing video and audio clips together in Windows Live Movie Maker (plenty adequate for my simple usage). You can see an example of this on the home page for zaanglabs.
The input video was a 720p .wmv file output from Movie Maker that comes in at 13.7MB. The output is a 3MB h.264 encoded .flv that is almost as good as the original.
For anyone doing webcasts using open source tools (or you just need to encode whatever you output from Movie Maker), this is what you'll need to pull it all together:
FFMPEG -i input.wmv -ar 44100 -qscale 9 -vcodec libx264 output.flv
The input is the file saved from Movie Maker and the output is a file that can be streamed using Flowplayer. That seems to be the secret sauce after playing around with various settings and different configuration options. This yields an output video that should be nearly indistinguishable from the original for webcasting purposes. I'm sure you'll have to adjust the value if you have more action in your frames.